Financial Advisor Agreement - Legg Mason Wood Walker Inc. and Celsion Corp.
May 8, 2002
PERSONAL AND CONFIDENTIAL
Mr. Anthony P. Deasey
Executive President Finance and Administration
And Chief Financial Officer
Celsion Corporation
10220-I Old Columbia Road
Columbia, Maryland 21046
Dear Mr. Deasey:
1. Celsion Corporation (together with any present and future
subsidiaries and affiliates of Celsion Corporation, the "Company") hereby
retains Legg Mason Wood Walker, Incorporated ("Legg Mason") to serve as
financial advisor to the Company for the twelve month period commencing on May
1, 2002.
2. In such capacity, Legg Mason shall be available for advice, and
shall advise the Company, with respect to such financial matters as the Company
shall from time to time request, including matters relating to (a) strategic
partnering opportunities related to its Microfocus BPH 800 ("BPH 800") product
for the treatment of Benign Prostatic Hyperplasia, (b) the structure, timing,
and financial terms of any such strategic partnering transaction for BPH 800,
(c) alternative corporate structures that may be available to assist in
maximizing shareholder value in connection with the research, development and
commercialization of BPH 800 and or therapies or products that the Company is
developing or plans to develop from time to time, (d) matters potentially
impacting the Company related to any such transaction or series of transactions;
and (e) future funding of the business.
3. In connection with our engagement, Legg Mason will develop, in
consultation with the Company, a list of entities that Legg Mason believes might
be potential strategic partners of the Company in connection with BPH 800. Legg
Mason will initiate discussions with potential partners, participate in the
negotiation of possible transactions and advise the Company as to negotiating
strategy and other matters in connection therewith. The Company will furnish
Legg Mason with such information and material regarding the Company as the
Company has or reasonably can produce or obtain as Legg Mason may request in
1
<PAGE>
connection with the performance of its obligations hereunder. Legg Mason will
assist the Company in preparing a document or documents (collectively,
"Documents") to describe the Company and its management, products and financial
status for use in discussions with prospective partners. The Company represents
and warrants that, except as it may specifically indicate in writing, all
information made available to Legg Mason by the Company or contained in the
Documents will, at all times during the period of the engagement of Legg Mason
hereunder, be complete and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances under which such statements are made. The Company further
represents and warrants that any projections provided to Legg Mason or contained
in the Documents will have been prepared in good faith and will be based upon
assumptions which in light of the circumstances under which they are made, are
reasonable. The Company acknowledges and agrees that, in rendering its services
hereunder, Legg Mason will be using and relying, without any independent
investigation or verification thereof, on information that is or will be
furnished to Legg Mason by or on behalf of the Company and on publicly available
information, and Legg Mason will not in any respect be responsible for the
accuracy or completeness of any of the foregoing kinds of information (included
in the Documents or otherwise). The Company also acknowledges and agrees that
Legg Mason will not undertake to make an independent appraisal of any of the
assets of the Company or any of its subsidiaries or affiliates. The Company
understands that, in rendering services hereunder, Legg Mason will also rely
upon the advice of counsel to the Company and other advisors to the Company as
to legal, tax and other matters relating to any transaction or proposed
transaction contemplated by this Agreement.
4. For the purposes of this Agreement:
(a) A "Transaction" shall mean a Sale Event or a Financing (each
as defined herein) involving the Company. A "Sale Event" shall
mean any transaction or series or combination of transactions,
other than in the ordinary course of trade or business,
whereby, directly or indirectly, control of or a material
interest in the Company or its subsidiaries or affiliates, or
any of their respective businesses (a "Business") or any of
their respective assets (including, without limitation, the
BPH 800), is transferred for consideration, including, without
limitation, a sale or exchange of capital stock or assets, a
lease of assets with or without a purchase option, a merger or
consolidation, a recapitalization, a tender or exchange offer,
a leveraged buy-out, the formation of a joint venture or
partnership, or any similar transaction; provided that any
transaction, or portion of a transaction, in which securities
of the Company or any of its subsidiaries are issued or sold
2
<PAGE>
by the Company shall constitute a Financing (as defined
herein) and not a Sale Event . A "Financing" shall mean any
transaction in which securities of the Company are issued or
sold by the Company. For example, in a transaction in which
(i) securities of the Company are issued to an investor and
(ii) the investor subsequently purchases the BPH 800, the
portion of the transaction in clause (i) above shall
constitute a Financing and the portion of the transaction in
clause (ii) above shall constitute a Sale Event. In no event
will any one portion of a Transaction constitute both a Sale
Event and a Financing.
(b) Except as provided in subsection 3(c) below, "consideration"
shall mean the full transaction value of any Sale Event
including, without limitation, the total value of all cash,
securities, other property and any contingent, earned or other
consideration paid or payable, directly or indirectly, by an
acquiring party to a selling party or to a participant in the
transaction in connection with a Sale Event. The value of any
such securities (whether debt or equity) or other property or
items of value shall be determined as follows: (i) the value
of securities that are freely tradable in an established
public market shall be the average of the high and low market
prices of such securities on the ten (10) trading days ending
on the trading day prior to the public announcement Sale
Event; (ii) the value of securities which are not freely
tradable or which have no established public market, or if the
consideration utilized consists of property other than
securities, the value of such securities or other property
shall be the fair market value thereof and (iii) the sum of
all lease payments. "Consideration" shall also include the
face value of any indebtedness (except to trade creditors) to
which the Sale Event is subject or to which the Company or its
subsidiaries or affiliates (or portion thereof) to be sold
remains obligated, or indebtedness that is assumed in
connection therewith, and the value of any payments to be
received by the principals of the Company for entering into
non-compete or similar agreements. In the case of a
recapitalization, "consideration" shall include the aggregate
amount of indebtedness incurred or equity raised by the
Company or a successor thereof in connection with such
recapitalization. If any consideration to be paid is computed
in a foreign currency, the value of such foreign currency
shall, for purposes hereof, be converted into U.S. Dollars at
the prevailing official exchange rate on the date or dates on
which such consideration is paid.
3
<PAGE>
5. Legg Mason shall develop, update and review with the Company on a
regular basis a list (the "List") of parties which reasonably might be expected
to be interested in a Transaction. In addition, the Company shall furnish to
Legg Mason the names of all parties with which the Company has had contact
regarding a Transaction during the term hereof, and shall refer to Legg Mason
all parties who contact the Company or its subsidiaries, affiliates or
representatives during the term hereof regarding a Transaction; all such
additional parties shall be included on the List. Legg Mason shall contact only
such parties on the List as the Company approves in advance of such contact.
6. As compensation for the services rendered by Legg Mason hereunder,
the Company shall pay or cause Legg Mason to be paid as follows:
(a) An initial fee of $75,000, payable upon the execution of this
Agreement. The initial fee shall be earned when paid and shall
be nonrefundable, provided that such fee shall be credited
against any fees that may be payable pursuant to subsection
6(b) below.
(b) If a Transaction occurs, or the parties to a Transaction reach
a preliminary or definitive agreement in respect of such
Transaction, either:
(i) during the term of Legg Mason's engagement hereunder,
regardless of whether the party or parties to the
Transaction were identified by Legg Mason or whether
Legg Mason rendered advice concerning the
Transaction, or
(ii) at any time during a period of 24 months following
the effective date of termination of Legg Mason's
engagement hereunder, and the Transaction involves a
party included (or which should have been disclosed
to Legg Mason pursuant to Section 5) on the List,
then, upon consummation of the Transaction, the
Company shall pay to Legg Mason (X) if the
Transaction is a Sale Event the following percentages
of the consideration involved in such Sale Event:
Consideration Percentage
-----------------------------------------------------
On the first $50 million .......................2.50%
Plus on the amount between $50 million
and $100 million .............................2.00%
Plus on the amount between $100 million
and $200 million .............................1.50%
4
<PAGE>
Plus on all amounts above $200 million .........1.00%
or (Y) if the Transaction is a Financing, a fee equal
to 6.00% of the aggregate gross amount of the
Financing.
Provided that if the counter party to a Transaction with the
Company is Boston Scientific Corporation or any of its
subsidiaries or affiliates, the Company shall pay to Legg
Mason the following percentages of the consideration involved,
based on the amount of time elapsed between the date hereof
and the execution of a definitive agreement containing the
material terms of a Transaction.
In the event of a Sale:
Consideration 0-45 days 46 - 90 days 91+ days
---------------------------------------------------------------------------------
On the first 50 million 2.0% 2.25% 2.5%
Plus on the amount between
$50 million and $100 million 1.60% 1.80% 2.00%
Plus on the amount between
$100 million and $200 million 1.20% 1.35% 1.50%
Plus on all amounts above
$200 million .80% .70% 1.00%
In the event of a Financing:
0-45 days 46 - 90 days 91+ days
-----------------------------------------
Consideration 4.8% 5.4% 6.0%
(c) Compensation which is payable to Legg Mason pursuant
to subsection 6(b) shall be paid by the Company to
Legg Mason at the closing of a Transaction, provided
that compensation with respect to a Sale Event
attributable to that part of consideration which is
contingent upon the occurrence of some future event
(e.g., the realization of earnings projections)
("Contingent Consideration") or otherwise is deferred
("Deferred Consideration") shall be paid by the
Company to Legg Mason at the time of receipt of such
consideration.
(d) In the event that Contingent Consideration or
Deferred Consideration described in subsection 6(c)
above is payable by an individual, group or legal
entity other than the Company, or by a successor to
the Company, after the closing of a Sale Event, the
5
<PAGE>
Company shall cause such individual, group, entity or
successor to pay compensation payable to Legg Mason
hereunder, or, at the closing, to enter into an
agreement to pay such compensation to Legg Mason
according to the terms hereof.
(e) In the event a Financing has occurred and the
investor or investors in the Financing has or have a
right (whether through an option, right of first
refusal or otherwise) that it acquired during the
term of this Agreement or within 24 months after
termination thereof to acquire subsequently assets of
the Company (including, without limitation, the BPH
800), a material interest in the Company or control
of the Company, then the exercise of such right shall
constitute a Sale Event hereunder, regardless of the
amount of time that passes prior to such exercise,
and the Company will pay to Legg Mason, upon
consummation of the transaction, the fee specified in
clause (X) of subsection 6(b) above with respect to
such Sale Event. Any fee that has previously been
paid under subsection 6(b) above shall be credited
against any fee due under this subsection 6(e).
(f) The Company hereby grants Legg Mason a right of first
refusal to represent the Company as its exclusive
financial advisor, on the same terms and conditions
as are contained in this Agreement, in the event a
Financing has been consummated during the term hereof
and within two years of the closing of the Financing
the Company seeks to effect a Sale Event (other than
a Sale covered by subsection 6(e) above). Nothing
herein constitutes an obligation of Legg Mason to so
represent the Company; provided, however, that in the
event that Legg Mason does not exercise its right of
first refusal within five (5) business days following
notice from the Company that it is contemplating a
Sale Event, such right of first refusal shall expire
and be null and void and of no further force or
effect.
7. In addition to the fees described in Section 6 above and the
obligation of the Company to pay certain expenses set forth in Section 8 below,
and whether or not any Transaction is consummated, the Company will pay all of
Legg Mason's reasonable out-of-pocket expenses (including document and
presentation material expenses and the fees and expenses of its counsel)
incurred in negotiating the terms of and in carrying out its duties under this
engagement. Upon request, Legg Mason will submit reasonable back-up
documentation for all such expenses. Such out-of-pocket expenses shall not
exceed $25,000 without the Company's prior approval and shall be payable upon
request by Legg Mason.
6
<PAGE>
8. In connection with engagements of the nature covered by this
Agreement, it is Legg Mason's practice to provide for indemnification,
contribution, and limitation of liability. By signing this Agreement, the
Company agrees to the provisions attached to this Agreement (Attachment A),
which provisions are expressly incorporated by reference herein.
9. The Company represents and warrants to Legg Mason that this
Agreement has been duly authorized and represents the legal, valid, binding and
enforceable obligation of the Company and that neither this Agreement nor the
consummation of the transactions contemplated hereby requires the approval or
consent of any governmental or regulatory agency or violates any law,
regulation, contract or order binding on the Company.
10. Except as contemplated by the terms hereof or as required by
applicable law, Legg Mason shall keep confidential all material non-public
information provided to it by or on behalf of the Company, and shall not
disclose such information to any third party, other than such of its employees,
affiliates, agents and advisors as Legg Mason reasonably determines to have a
need to know in order to permit Legg Mason to discharge its obligations
hereunder. The Documents and any other confidential information or data about
the Company will be made available to a potential Transaction party only upon
its execution of a confidentiality agreement prepared by Legg Mason and
acceptable to the Company. Legg Mason will destroy all confidential information
in its possession, including any and all documents prepared on the basis of or
containing or reflecting any confidential information in the event that this
engagement is terminated prior to consummation of a Transaction and, upon the
Company's request, shall certify in writing to the Company that it has done so.
Notwithstanding any such destruction or termination, Legg Mason shall continue
to keep confidential any confidential information or data about the Company that
it learns during the course of its engagement hereunder.
11. Legg Mason is being retained to serve as financial advisor solely
to the Company, and it is agreed that the engagement of Legg Mason is not, and
shall not be deemed to be, on behalf of, and is not intended to confer rights or
benefits upon, any shareholder or creditor of the Company or its subsidiaries or
upon any other person or entity. No one other than the Company is authorized to
rely upon this engagement of Legg Mason or any statements, conduct or advice of
Legg Mason, and no one other than the Company is intended to be a beneficiary of
this engagement. All opinions, advice or other assistance (whether written or
oral) given by Legg Mason in connection with this engagement are intended solely
for the benefit and use of the Company and will be treated by the Company as
confidential, and no opinion, advice or other assistance of Legg Mason shall be
used for any other purpose or reproduced, disseminated, quoted or referred to at
any time, in any manner or for any purpose, nor shall any public or other
references to Legg Mason (or to such opinions, advice or other assistance) be
made without the express prior written consent of Legg Mason.
7
<PAGE>
12. The Company agrees that, following the closing or consummation of a
Transaction, Legg Mason has the right to place advertisements in financial and
other newspapers and journals at its own expense, describing its services to the
Company hereunder, provided that Legg Mason will submit a copy of any such
advertisements to the Company for its prior approval, which approval shall not
unreasonably be withheld.
13. The term of this engagement will continue until the earliest of
April 30, 2003, the closing or consummation of a Transaction or until terminated
in the manner provided for in this Section. Either party may terminate Legg
Mason's engagement hereunder at any time by giving the other party at least 30
days' prior written notice. Within 30 days after the effective date of any such
termination, Legg Mason will deliver to the Company a copy of the List (as
described in Section 5 above) as then constituted. The provisions of Sections 2,
6, 7, 8, 10 and 12 hereof shall survive any expiration or termination of this
Agreement.
14. The Company represents and warrants that there are no brokers,
representatives or other persons which have an interest in any compensation due
to Legg Mason from any transaction contemplated herein.
15. The terms and provisions of this Agreement are solely for the
benefit of the Company and Legg Mason and the other Indemnified Persons and
their respective successors, assigns, heirs and personal representatives, and no
other person or entity shall acquire or have any right by virtue of this
Agreement. This Agreement represents the entire understanding between the
Company and Legg Mason with respect to Legg Mason's engagement hereunder, and
all prior discussions are merged herein. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Maryland without
regard to such state's principles of conflicts of laws, and may be amended,
modified or supplemented only by written instrument executed by each of the
parties hereto.
16. The parties hereby submit to the jurisdiction of and venue in the
federal courts located in the City of Baltimore, Maryland in connection with any
dispute related to this Agreement, any transaction contemplated hereby, or any
other matter contemplated hereby.
8
<PAGE>
If the foregoing correctly sets forth the entire understanding and agreement
between Legg Mason and the Company, please so indicate in the space provided for
that purpose below and return an executed copy to us, whereupon this letter
shall constitute a binding agreement as of the date first above written.
Very truly yours,
LEGG MASON WOOD WALKER, INCORPORATED
By:__________________________________
Scott R. Cousino
Managing Director
AGREED:
CELSION CORPORATION
By:______________________________________________
Anthony P. Deasey
Executive Vice President Finance and Administration
And Chief Financial Officer
9
<PAGE>
ATTACHMENT A
LEGG MASON WOOD WALKER, INCORPORATED
INDEMNIFICATION, CONTRIBUTION AND
LIMITATION OF LIABILITY PROVISIONS
(a) The Company agrees to indemnify and hold harmless Legg Mason and its
affiliates and their respective officers, directors, employees and
agents, and any persons controlling Legg Mason or any of its affiliates
within the meaning of Section 15 of the Securities Act of 1933 or
Section 20 of the Securities Exchange Act of 1934 (Legg Mason and each
such other person or entity being referred to herein as an "Indemnified
Person"), from and against all claims, liabilities, losses or damages
(or actions in respect thereof) or other expenses (collectively,
"Damages") which (A) are related to or arise out of (i) actions taken
or omitted to be taken (including any untrue statements made or any
statements omitted to be made) by the Company or its affiliates or (ii)
actions taken or omitted to be taken by an Indemnified Person with the
consent or in conformity with the actions or omissions of the Company
or its affiliates or (B) are otherwise related to or arise out of Legg
Mason's activities on behalf of the Company. The Company will not be
responsible, however, Damages pursuant to clauses (A)(ii) or (B) of the
preceding sentence which are finally judicially determined to have
resulted primarily from such Indemnified Person's gross negligence or
willful misconduct. In addition, the Company agrees to reimburse each
Indemnified Person for all out-of-pocket expenses (including fees and
expenses of counsel) actually and reasonably incurred as the are
incurred by such Indemnified Person in connection with investigating,
preparing, conducting or defending any such action or claim, whether or
not in connection with enforcing the rights of such Indemnified Person
under this Agreement, unless such Indemnified Person is not entitled to
indemnification pursuant to the preceding sentence.
(b) If for any reason the foregoing indemnity is unavailable to an
Indemnified Person or insufficient to hold an Indemnified Person
harmless, then the Company shall contribute to the amount paid or
payable by such Indemnified Person as a result of such claim,
liability, loss, damage or expense in such proportion as is appropriate
to reflect not only the relative benefits received by the Company on
the one hand and Legg Mason on the other, but also the relative fault
of the Company and Legg Mason, as well as any relevant equitable
considerations, subject to the limitation that in any event the
aggregate contribution of all Indemnified Persons to all losses,
claims, liabilities, damages and expenses shall not exceed the amount
of fees actually received by Legg Mason and its affiliates and their
respective officers, directors, employees and agents, and any persons
controlling Legg Mason or any of its affiliates pursuant to this
Agreement. It is hereby further agreed that the relative benefits to
the Company on the one hand and Legg Mason on the other with respect to
any transaction or proposed transaction contemplated by this Agreement
10
<PAGE>
shall be deemed to be in the same proportion as (i) the total value the
transaction or proposed transaction bears to (ii) the fees paid to Legg
Mason with respect to such transaction.
(c) No Indemnified Person shall have any liability to the Company or any
other person in connection with the services rendered pursuant to this
Agreement, except for any liability for losses, claims, damages or
liabilities finally judicially determined to have resulted primarily
from such Indemnified Person's bad faith, gross negligence or willful
misconduct.
(d) If indemnification is to be sought hereunder by any Indemnified Person,
then such Indemnified Person shall notify the Company of the
commencement of any action or proceeding in respect thereof; provided,
however, that the failure so to notify the Company shall not relieve
the Company from any liability that it may otherwise have to such
Indemnified Person except to the extent that such liability arises from
such failure to notify. Following such notification, the Company may
elect in writing to assume the defense of such action or proceeding,
and, upon such election, it shall not be liable for any legal costs
subsequently incurred by such Indemnified Person (other than reasonable
costs of investigation) in connection therewith, unless (i) the Company
has failed to provide counsel of recognized standing and reasonably
satisfactory to such Indemnified Person in a timely manner or (ii)
representation of such Indemnified Person by counsel provided by the
Company could present such counsel with a conflict of interest.
(e) The Company agrees that it will not settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought
from the Company by any Indemnified Person (whether any Indemnified
Person is an actual or potential party to such claim, action, suit or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person hereunder from all
liability arising out of such claim, action, suit or proceeding.
(f) To the extent officers or employees of Legg Mason appear as witnesses,
are deposed, or otherwise are involved in or assist with any action,
hearing or proceeding related to or arising from a Transaction or Legg
Mason's engagement hereunder, the Company will pay Legg Mason, in
addition to the fees set forth above, Legg Mason's customary per diem
charges, In addition, if any Indemnified Person appears as a witness,
is deposed or otherwise is involved in any action relating to or
arising from a Transaction or Legg Mason's engagement hereunder, the
Company will reimburse such Indemnified Person for all expenses
(including fees and expenses of counsel) actually and reasonably
incurred by it by reason of it or any of its personnel being involved
in any such action unless the action, hearing or proceeding relates to
or arises from Legg Mason's gross negligence or willful misconduct.
(g) The Company waives any right to a trial by jury with respect to any
claim or action arising out of this Agreement or the actions of Legg
Mason, and consents to personal jurisdiction, service of process and
11
<PAGE>
venue in any court in which any claim covered by the provisions of this
Attachment A may be brought against an Indemnified Person.
(h) The provisions of this Attachment A shall be in addition to any
liability the Company may have to any Indemnified Person at common law
or otherwise, and shall survive the expiration of the term of this
Agreement and the closing of any sale of the Company.
12